Teach Kids to Avoid Debt

As parents, we all want our kids to get the best possible education. A deficiency of the school system, however, is that it rarely teaches kids about the importance of money management and how to avoid debt. That educational responsibility is left, by default, to parents. We should not underestimate the importance of teaching our kids money skills, as our children’s ability to accumulate and manage money may go a long way to determining their future happiness. Let’s look then at some of the things that parents can do to instill good money management skills in their kids.

1. Teach your kids the value of money:

If you buy everything that your child craves, then they will probably grow up ignorant of the financial realities that adults face. Even if you buy essentials such as school uniforms, it is good to give your child an allowance and then let them make decisions for themselves on what items they buy with their money. This will teach them that they have a finite amount of money to play with and that they need to evaluate which items they really want. This teaches them the concept of opportunity cost; that if you buy one item, it may be at the expense of buying another item.

2. Introduce them to the savings habit:

When your kids are still very young, you can buy them a piggy bank and encourage them to fill it. There are some very cool piggy banks that can be found in shops, and hopefully your child will find a simple satisfaction in gradually seeing their piggy bank becoming fuller. As a kid, I had a piggy bank that required a key to open it and I liked to tip all my coins out and count my wealth from time to time.

Of course, it will be tempting for your kids to spend all their pocket money on sweets and toys but there are ways that you can encourage a regular saving behavior. One approach is to make them aware that putting money aside each week can enable them to save up for that special toy that they’ve had their eye on but which costs more than their weekly pocket money. Another approach might be to incentivise their saving by saying that if they save some money, then you’ll match that amount or pay them a bonus. This is effectively teaching them that one of the benefits of saving is that your money can grow.

As your kid gets older, you can also open a bank savings account for them. Some of these come with pay-in books so that it’s easy to keep track of how much money is in the account. Hopefully, the ground work that you’ve done on instilling savings habits will mean that your son or daughter will be keen to see their balance grow rather than just itching to be able to withdraw all their money to go on a spending spree!

3. Explain what debt is and why it can be so bad:

How many of us knew next to nothing about credit cards or overdrafts when we opened our first credit card or checking account? The answer is probably quite a scarily high percentage. Often the first time that we are handed total control of our finances is when we go to university or start our first job, and all too often this financial freedom goes to our head and we rack up debt that proves expensive and stressful to clear.

Young people who are properly informed about debt and about financial products are much more likely to avoid such pitfalls. Amongst the key things that young adults need to understand are that bank fees will be incurred if they exceed their overdraft limit, and that credit cards can become extremely expensive and dangerous if not paid off in full every month.

4. Talk to them about wealth and its importance:

As your kids get older they are going to be faced with decisions about whether to proceed to further education and about their choice of career. For those who have been insulated from the real world, there is the danger that they simply drift through decisions without giving adequate thought to the consequences of their choices. This can lead to later regrets and make it more difficult for them to earn the kind of money that is necessary to own their own home and enjoy a comfortable standard of living.

Being obsessed with material wealth is unhealthy but it’s important that young people understand the practical need to earn money and that they are able to make the best use of their skills to achieve the lifestyle that they aspire to.

5. Pensions and investments:

As well as tutoring them in the importance of earning a living, it’s also worth stressing the importance of starting a pension and how they can use the stock market to invest for the future. These aren’t conversations that you will have with a ten year old but the role of providing sage parental advice continues long after your kids have flown the nest, and there are huge benefits to starting early when it comes to pension provision and investment activity.

6. Encourage them to find their own feet:

We live in an age where young people seem increasingly reluctant to strike out on their own, and the instances of twenty-somethings and even thirty-somethings remaining in the parental home has become commonplace. This is not necessarily conducive to developing good financial management skills, however. Indeed, for those who are earning a salary, you might want to ask them to provide rent money as they would if they were renting an apartment. This will ensure that they have to pay more than lip service to the importance of budgeting and being sensible with their spending.


It’s important that we don’t make out money to be the only thing in life. However, whilst it may not be able to buy you happiness there is no doubt that an absence of money can make people’s lives miserable and this is especially the case where people become weighed down with debt.

As parents, ensuring the happiness of our kids is of paramount importance so it’s only natural that we’d want to properly prepare them for life in the real world. There can be sadness when a son or daughter leaves the parental house but there will be a great sense of pride as you see them carve out a career and being successful in life. Young people who manage to avoid the debt pitfall will be much better placed to prosper and attitudes to money and spending can be picked up at a young age. Understanding the importance of saving and investment with a view to wealth creation will be invaluable. Of course, not all parents will feel like they are experts at teaching lessons in money and finance. However, we can use our own experiences (whether good or bad) to illustrate the importance of things such as budgeting and credit card prudence, and there are plenty of resources available (including books, websites, and bank student advisors) to augment your child’s financial education.